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Close to the Panama Canal, China plans $100b Nicaragua Canal to ensure access to the Atlantic

By MH Rajesh:  A Chinese firm has planned to open a canal akin to the Panama Canal across Nicaragua connecting the Pacific and Atlantic. The $100bn canal will be funded and built by a Chinese telecom giant with deep pockets and political connections. Nicaragua is 15000km from India as well as China, yet, this is of interest since this is another illustration of China’s widening interests across continents.

 

Nicaragua

A 270 km canal, in Nicaragua, 15000 km away normally shouldn’t create a flutter. However, on second look it becomes interesting. Especially, when you learn that a Chinese telecom giant with no previous industry experience has tied up with Nicaraguan government for such a large scale project. That it is a stone’s throw away from USA and that it has puzzled many adds to its news value.

This IISS analysis surveys the plan by a Chinese firm to open a canal akin to the Panama Canal across Nicaragua connecting the Pacific and Atlantic. The $100bn canal will be funded and built by a Chinese telecom giant with no [previous industry experience, deep pockets and political connections. Nicaragua is 15000km from India as well as China, yet, this is of interest since this is a sample of the wide swath that Chinese strategic interests cover across continents.

Canals that cut isthmuses always caught the global imagination due to the immense scope in easing maritime transportation. They cut travel time immensely avoiding tricky capes and notorious seas. The Suez Canal shaves off a 4300miles between India and Europe and the Panama Canal shaves approximately 5000 miles of distance when one travels from one side of Americas to the other.

Interestingly, though separated by thousands of miles, both Suez and Panama canals vie for each other for business from Far East to America.  In a price sensitive shipping market, minor fluctuation in canal tolls can wean ships away from one to another. Canals also form a large corpus in the economies of owner nations.

Canals also have been subject of some very serious politics.

It is in such a competitive and complex scenario that the alternative canal across Nicaragua has emerged as a new variable. At 100bn investment, Nicaraguan Canal funded by Chinese business, if fructified would compete with both existing traditional canals for business. It is to be seen how this 100bn investment would be recouped by Chinese.

Both the traditional canals are over a century old and were built to standards of those times. The shipping sizes have surpassed the canals long back, however, the sheer economic advantage has made the Panamax and Suezmax ships fashionable in the industry. Despite improvements in the existing canals, a canal build ‘keel up’ can always have an edge over the others since it can cater to the state of the art in shipping sizes as well as technology.

However this project is fraught with issues such as a delicate ecology and geopolitics. The new state of the art canal across Nicaragua would cut the distance between the East and West Coast of America by up to a 10000 km which the Panama Canal, with as established political order, is already doing.  That would be funded and managed by Chinese firm is relevant to note. As an aside, what is also of interest is that the opening of Arctic channels is the ‘wild card’ in the business of canal shipping. The Arctic route offers a ‘natural canal ‘and has the potential to impact the business and politics of canals.

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